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Durable Medical Equipment Community Supports Tough Anti-Fraud Measures, Corrects Persistent Myths

WASHINGTON, Sept. 22 /PRNewswire-USNewswire/ -- The American Association for Homecare supports tough anti-fraud measures for Medicare, and we hope that the Energy and Commerce subcommittee hearing on this issue this week will focus on effective measures to prevent theft of taxpayer dollars. The American Association for Homecare represents providers of durable medical, or home medical equipment and services.

We have zero tolerance for fraud and will continue to work to help the Centers for Medicare and Medicaid Services, the HHS Office of Inspector General, and other federal officials to more effectively regulate this sector.

Several years ago, the American Association for Homecare proposed to Congress a 13-point Medicare Anti-Fraud Legislative Action Plan that included tougher penalties for fraud, more site visits, and real-time claims audits to prevent fraud at the front-end of the process rather than relying on the ineffective pay-and-chase system.  Parts of our 13-point plan have been proposed in several congressional bills and were adopted in the recent health reform law.  However, we encourage Congress to adopt all of our proposals to ensure a comprehensive approach that shuts down avenues for Medicare fraud.  Details of the 13-point plan can be viewed at

It's important to point out that providers of home medical equipment must now be accredited by a deemed accrediting organization and they must also post a surety bond. These two requirements took effect a year ago, October 2009, and fraud associated with the home medical equipment sector has likely declined since then. We encourage federal officials to assess and report the rate of fraud since those requirements took effect.  

Spending in the home medical equipment sector represents less than two percent of total Medicare spending, and fraud associated with durable medical equipment represents a tiny fraction of total fraud in Medicare.  

A number of important new anti-fraud measures are now in place, which were long overdue. But Congress, CMS, and the Office of Inspector General should not promote or impose unreasonable burdens on the existing, accredited home medical equipment providers.  

Correcting the Record: Myths Associated with Fraud Debate

During discussions on the issue of fraud in the home medical equipment sector, policymakers frequently commingle issues that distort and misrepresent the homecare community.

Competitive Bidding Is a Payment Mechanism, Not an Anti-Fraud Measure

Competitive bidding is simply a payment mechanism—not an anti-fraud tool.  When competitive bidding was enacted in 2003, Congress adopted a number of separate measures to address fraud and abuse through the establishment of quality standards and mandatory accreditation.  CMS also has taken additional steps recently to prevent fraud through the implementation of surety bonds and more stringent supplier standards.  Medicare has also issued enhanced provider enrollment rules and more stringent supplier standards.

Internet Pricing Is Not an Accurate Benchmark for Medicare Payment Levels

Several studies conducted by federal agencies such as the GAO and the OIG highlight the disparity between Internet prices and Medicare payments.  This is not an accurate comparison.  First, these studies clearly cite that the analyses did not look at service-related costs in the provision of home medical equipment.  The studies also overlook overhead, staffing costs and mandatory accreditation, 24/7 emergency care, adherence to quality standards, and FDA's home use requirements.  There has been only one comprehensive study that has evaluated both service and equipment costs.  This study found that in the oxygen arena, equipment costs only account for 28 percent of the Medicare payment rate.  The remaining 72 percent is related to service and general and administrative costs.

Payment Rates that Differ from Internet Pricing Do Not Promote Fraud

Criminals out to defraud the Medicare program are intent on stealing.  They do not provide equipment and services and they do not follow Medicare rules and regulations.  However, recently, the OIG stated that because home medical equipment reimbursement rates are often higher than pricing for HME available on the Internet, it inherently leads to fraud and abuse.  The OIG reasons that excess revenues attract criminals who intend to defraud the Medicare program and can be used to promote kick-back arrangements.  This is an unsubstantiated assumption.  AAHomecare is not aware of any federal study conducted by the OIG or the GAO that demonstrates that excessive payment promotes fraud.  The real point is that criminals intent on defrauding Medicare are not suppliers and have no intention of providing items and services to Medicare beneficiaries regardless of the payment rate.

There Is Not an Excessive Number of HME Providers

Federal officials frequently point to the need to reduce the number of suppliers that participate with the Medicare program.  What is overlooked is that there are only approximately 15,000 home medical equipment providers nationwide—or about one for every 2,500 Medicare beneficiaries. Even CMS cites the statistic that only 20 percent of suppliers in the round one areas of competitive bidding bill more than $10,000 to the Medicare program annually.  The vast majority of entities that have supplier numbers are pharmacies like CVS or Rite Aid, physical therapists, physicians, ophthalmologists, prosthetists, neurosurgeons, dentists, and other similar providers.  Moreover, some policymakers have stated that the DMEPOS fee schedule is outdated.  This is incorrect as Congress and CMS have adjusted DME pricing multiple times over the past decade so that current Medicare payments are sometimes 50 percent less than they were a decade ago.

Improper Payments Should Not Be Confused with Fraud

There have been a number of audit samples of specific HME items such as oxygen therapy, power wheelchairs and continuous positive airway pressure (CPAP) devices that indicate a high improper payment rate.  As the OIG correctly points out, the increase in the Medicare error rate in the home medical equipment sector is "not necessarily due to more fraud in the program. In fact, the error rate is not a measure of fraud." In 2009, the OIG implemented a strict adherence to policy documentation requirements, retro application of rules, signature legibility requirements, and lack of physician documentation and the removal of claims history as a valid source for review information.  In this latter example, in previous years, auditors could use clinical inference to determine if a claim was reasonable and necessary.  Now, they cannot use their education and training to determine if a claim is appropriate.

However, when there is an error rate of 78 percent as was the case in a recent oxygen probe audit, this points to a larger problem with the overall system—not with HME providers.  We maintain that CMS is not doing an adequate job of educating physicians and homecare providers and the policies have become so complex that the vast majority of HME providers are not able to reasonably comply. In this example and others, federal bureaucrats are overturning physician decision making and judgment in more than 3 out of every 4 cases. Upon appeal at the Administrative Law Judge (ALJ) level, the ALJs are reversing CMS' decisions 3 out of 4 times suggesting that there is an institutional disconnect that is hurting legitimate providers of HME.

Homecare providers and the Medicare beneficiaries they serve require clear, reasonable, consistent, and unambiguous guidance that does not change from auditor to auditor.

CMS and Its Private Contractors Have Failed in their Oversight of Supplier Enrollment

A number of reports have pointed to the low barrier to entry that has made home medical equipment vulnerable to criminal activity and fraud.  In south Florida, for example, the OIG conducted unannounced site visits to 1,581 providers and found that 31 percent of these providers did not maintain a physical facility or were not open and staffed during business hours.  In another analysis, the GAO found that a supplier number was granted to a broom closet.  

AAHomecare believes that CMS and its contractors have failed in their oversight responsibility.  It is CMS' responsibility to determine whether a supplier should be granted billing privileges.  CMS is required to conduct a site visit for any new supplier and upon renewal of the supplier number every three years.  If CMS were doing an adequate job, these egregious lapses would not have occurred.  Congress has also addressed this vulnerability by requiring mandatory accreditation and quality standards for all home medical equipment providers.  This should serve as a double check on CMS and raises the bar of entry and protect the Medicare program.  Finally, policymakers and the media focus on fraudulent activity that occurred prior to the implementation of enhanced screening tools in 2009.

Specific Anti-Fraud and Abuse Recommendations:

The American Association for Homecare has proposed the following 13 specific recommendations:

  • Mandate Site Inspections for All New Home Medical Equipment Providers. A July 2008 GAO report underscored the need for CMS to ensure that its contractors are conducting effective site inspections for all new applicants for a Medicare supplier number.  
  • Require Site Inspections for All HME Provider Renewals. All renewal applications should require an in-person visit by the National Supplier Clearinghouse (NSC).
  • Improve Validation of New Homecare Providers. Additional validation of new providers should be included in a comprehensive and effective application process for obtaining a Medicare supplier number.  
  • Require Two Additional Random, Unannounced Site Visits for All New Providers. Two unannounced site visits should be conducted by the NSC during the first year of operation for new HME providers.
  • Require a Six-Month Trial Period for New Providers. The NSC should issue a provisional, non-permanent supplier number to new suppliers for a six-month trial period.  After six months of demonstrated compliance, the provider would receive a "regular" supplier number.
  • Establish an Anti-Fraud Office at Medicare. CMS should establish an office with the sole mandate of coordinating detection and deterrence of fraud and improper payments across the Medicare and Medicaid programs.  
  • Ensure Proper Federal Funding for Fraud Prevention. Increase federal funding to ensure that the NSC completes site inspection and other anti-fraud measures.
  • Require Post-Payment Audit Reviews for All New Providers. Medicare's program safeguard contractors should conduct post-payment sample reviews for six months' worth of claims submitted to Medicare by new providers.  
  • Conduct Real-Time Claims Analysis and a Refocus on Audit Resources. Medicare must analyze billings of new and existing providers in real time to identify aberrant billing patterns more quickly.
  • Ensure All Providers Are Qualified to Offer the Services They Bill. A cross-check system within Medicare databases should ensure that homecare providers are qualified and accredited for the specific equipment and services for which they are billing.  
  • Establish Due Process Procedures for Suppliers. CMS should develop written due process procedures for the Medicare supplier number process, including issuance, denial and revocation of the Medicare supplier number.  The procedures must include, for example, an administrative appeals process and timelines.
  • Increase Penalties and Fines for Fraud. Congress should establish more severe penalties for instances of buying or stealing beneficiaries' Medicare numbers or physicians' provider numbers that may be used to defraud the government.
  • Establish More Rigorous Quality Standards. Ensure that all accrediting bodies are applying the same set of rigorous standards and degree of inspection to their clients.  

The American Association for Homecare represents durable medical equipment providers, manufacturers, and other organizations in the homecare community. Members serve the medical needs of millions of Americans who require oxygen equipment and therapy, mobility assistive technologies, medical supplies, inhalation drug therapy, home infusion, and other medical equipment and services in their homes. The Association's members operate more than 3,000 homecare locations in all 50 states. Visit

SOURCE American Association for Homecare
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